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SAUDI ARAMCO, the LARGEST company in the WORLD – VisualPolitik EN

SAUDI ARAMCO, the LARGEST company in the WORLD – VisualPolitik EN


Let’s do
a mental exercise. Imagine a company whose annual turnover surpasses
the economies of many entire countries. A company that produces more than 10% of all
the oil in the world and controls more oil reserves than any other country, except Venezuela. Such a colossus would be the greatest business
power of all time. A company that could alter the entire world
economy by itself. That is, a simple board of directors meeting
would be more important than virtually any decision of any government. Well… Dear friends of VisualPolitik, that company
exists and has now gone public. Yes, we’re talking about Saudi Aramco. Ok, you may not have heard of it, but this
company controls and manages practically all the oil fields in Saudi Arabia. This giant is worth almost two trillion dollars
in the market and can reap profits of more than 100 billion per year. To give you a comparison, that’s more than
the combined profits of the world’s five largest private oil companies. It’s a massive difference, check this out: (CHART) And what’s more, ARAMCO is also one of the
largest petrochemical and petroleum refining groups. For example, it controls refineries throughout
the world, including the largest refinery in the United States. Basically, in terms of fueling a car, this
company’s decisions are going to matter almost as much or more than your own government’s
decisions. So what exactly lies behind this company? Why has Saudi Arabia put its crown jewel on
the market? And exactly how far can this giant reach?? Listen up. (GOING ON THE MARKET) On December 11th, 2019, shares for Saudi Aramco
Oil Company began trading on Tadawul, Saudi Arabia’s stock exchange. The Saudi government barely sold 1.5% of the
shares, but that was still enough to make it the largest public offering of all time. They sold shares worth $25.6 billion. This money will nurture the Public Investment
Fund’s coffers, a fund that aims to invest in companies and sectors beyond oil. Because that’s the goal. You see, almost all the countries in the Persian
Gulf, which basically only produce oil and gas, are going crazy trying to diversify their
economies so they won’t be so dependent on these raw materials. But not everyone is in the same position. For some countries like Kuwait, Qatar or the
United Arab Emirates, this isn’t an urgent matter. After all, as we told you before on this channel,
they have huge resources, huge reserves of money, and very small populations. For example, in this video we told you how
Abu Dhabi’s savings surpass one and a half trillion, one and a half trillion dollars
per Emirati citizen. However, Saudi Arabia’s situation is very
different. The country of the House of Saud does indeed
have vast oil reserves, the second largest in the world after Venezuela, but the problem
is that its population is nothing like that of Kuwait or the Emirates. That is, in per capita terms, their resources
are much, much smaller. (CHART) And not only that, Saudi Arabia is a very
young country with high population growth rates. We’re talking about a country where 40%
of the population is under 25 years old. And yes, historically, oil has allowed them
to finance practically everything: large urban projects, free education and health care,
public jobs, a guaranteed income program, etc. However, with a significant portion of the
population aging, the situation is becoming increasingly complicated and the fact is that
the government has a huge glitch in its public accounts, a deficit of almost $50 billion
per year. And this figure of $50 billion was only achieved
after applying several cuts, new taxes and after the price of oil recovered. And still, it’s $50 billion. And that’s precisely where one of the great
protagonists of this story comes into play, the crown prince Mohammed Bin Salman, of whom
we’ve already talked about here on VisualPolitik and who today runs the country. You see, in January 2016, Mohammed Bin Salman
announced his intention to put 5% of Aramco on the market to finance his Vision 2030 program,
a plan that was born with one goal: to reduce the country’s huge dependence on oil. Because almost 70% of all of the Saudi government’s
income and 80% of its exports depend on this raw material. What’s more, in Saudi Arabia, non-oil activity
depends largely on public spending, which in turn depends on oil. In other words, it’s very hard to find a
sector of the economy that doesn’t, in one way or another, depend on hydrocarbons. We’re talking about an economy that’s
addicted to black gold. And of course, in a landscape with more and
more producers, where fracking has become a powerful rival and where concerns for the
environment and global warming could curb oil consumption, this dependence is a problem. Because if we also consider that the young
Saudi population expects a certain way of life, the country clearly needs to seek alternatives. And that was precisely the intention, to gradually
sell its stakes in Aramco to obtain money with which to finance other projects, to create
new jobs and reduce the country’s dependence on oil. But… as we often say, the road to ruin is
paved with good intentions.. Here’s a question, do you think that releasing
this giant into the stock market was a success? You could easily be drawn to that conclusion,
after all, the Saudi government got more than $25 billion. Well… if you think so, you’re very, very
wrong. In spite of the huge headlines that we may
have read in the media, the truth is that Aramco’s IPO wasn’t easy or successful. Let’s take a look. (THE LARGEST COMPANY IN THE WORLD) By being listed on the stock market, Aramco
has become the wealthiest listed company in the world. In fact, within a few days of trading, its
market value surpassed $2 trillion. (AUDIO: Aramco Valuation Hits Crown Prince’s
Coveted $2 Trillion Target. WSJ) But, just a second, because this the background
to this story is very, very different. You see, when Mohammed bin Salman announced
his plans, he wanted to list Aramco in one of the great world markets, such as New York,
London or even Hong Kong, that is, within reach of practically every investor in the
world. And not only that, he intended to sell 5%
of the company in order to raise at least one hundred billion dollars. But… In the end, that entire project ended with
the sale of just 1.5% of the shares… and only on the Saudi Arabia Stock Exchange Market
– which financially, is fairly insignificant.. So, the question that crops up is, what on
earth happened to cause such a change? Well, the truth is that going into one of
the big markets involved two major problems: On the one hand, these markets demand high
levels of transparency and compliance with many regulations, for example, the protection
of small investors… And that, for one of the murkiest companies
in the world, which has been cashing blank checks for the Saudi royal family for years,
well… just wouldn’t work. The prospect of transparency for a government
that’s used to doing what it wants, when it wants, and how it wants was all too much. And on the other hand, there was a much bigger
problem, which they couldn’t escape.The Saudi government was forced to face a harsh
reality: the market wasn’t willing to pay what the Saudi government requested for Aramco. Yes, it may be the world’s largest oil company
and have the lowest extraction costs… but it’s still a company controlled by one of
the most authoritarian and strictest regimes in the world. (AUDIO: Aramco should trade at a discount
rather than premium to international oil majors. We rate Saudi Aramco as underperforming.” Analysts at Bernstein to Financial Times) And don’t forget that we’re also talking
about the Middle East, one of the most volatile regions on the planet, where it isn’t strange
to see things like this: (AUDIO: May of 2019. Saudi Arabia Oil Pipeline Damaged in Drone
Attack by Houthi Rebels Armed drones forced shutdown of pipeline; incident follows attack
on two of the country’s oil tankers. WSJ) (AUDIO: September of 2019 Saudi Aramco reveals
attack damage at oil production plants. Twenty-five drones and missiles were used
in the attack that forced the kingdom to shut down half of its oil production, Saudi Arabia
has said. CNBC) Not to mention the dire situation of the country’s
public accounts. Because… whatever happens, the truth is
that Saudi Aramco will continue to finance the Saudi government, not just with dividends,
but also by paying lots of taxes: No less than 20% on its income and 50% on benefits. But even with those payments, the numbers
don’t add up. Neither above nor below, not one way or another. They simply don’t add up. And with a shortfall of $50 billion in the
public accounts, how do we know that the Saudi government won’t repeat what they did in
the past? That is, keep draining the cow: (AUDIO: If oil prices are lower, you could
expect that the state would potentially increase taxes. The promise to maintain high dividends to
non-state shareholders, he points out, would not be legally sacrosanct. Dmitry Marinchenko, Senior Director at Fitch
Ratings.) Well, it’s all these factors that made international
investors offer much less money than the Saudi government expected to get. And that happened despite the company promising
to distribute at least $75 billion per year in dividends. So it was those low ratings that forced them
to play at home. And do you know what? Its placement in the market has been an example
of how things work in these countries – badly. The sales operation had more doping than the
Tour de France! For example, the government “recommended”
that big businessmen start buying shares or suffer the consequences; They pressured allies such as the Emirates
and Kuwait to buy billions of dollars in shares; Banks had to give loans with extremely low-interest
rates so small investors could buy shares, And a huge advertising and telemarketing campaign
were launched. That is, the government did everything it
could to make the operation a success… Or at least to be able to say that it was. Because in the end…. most shares stayed at home. That is, the Saudi economy remains as dependent
on oil as it was before. And even more so, because now it isn’t just
the government but also many families’ heritages that are linked to oil. (AUDIO: They aren’t doing what they were
aiming to do, which is bring in foreign capital. It’s not a real deal, it’s political.” A senior banker, who asked not to be identified,
speaking to the Financial Times) The question we need to ask is: Are we looking
at a downfall in Mohammed Bin Salman’s plans? In any case, what’s clear is that this attempted
global sale has highlighted how things actually work in Saudi Arabia. Saudi Arabia is one of those countries where
what the government wants is done, at all times. And that’s a bad mix, at least if you’re
hoping to receive foreign investment. In short, this is the story of how the Saudi
Arabian government decided to begin privatizing its most valuable assets. Will it achieve its objectives and decrease
its dependence on oil? Would you be willing to invest your money
in a company like Aramco? Leave your answer in the comments. So I really hope you enjoyed this video, please
hit like if you did, and don’t forget to subscribe for brand new videos. Don’t forget to check out our friends at
the Reconsider Media Podcast – they provided the vocals in this episode that were not mine. Also, this channel is possible because of
Patreon, and our patrons on that platform. Please consider joining them and supporting
our mission of providing independent political coverage. And as always, I’ll see you in the next
video.

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21 thoughts on “SAUDI ARAMCO, the LARGEST company in the WORLD – VisualPolitik EN

  1. Thanks to Skillshare for sponsoring! Click here to explore your creativity and get 2 free months of Premium Membership: https://skl.sh/visualpolitik6

  2. Those who think Americans should leave the meddle east hit a like 👍

    Those who think Americans should be packed up and sent to outer space comment 😂

  3. The largest company in the world is the CCP, with different branches like Huawei and a whole country with approximately 1/6th of the entire world population, with a communistic Management structure, and no existing company ethics, nor interest in any ethics.

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